FedEx Forecast Trails Estimates on 'Modest' Recovery


Shipper's shares slip after offering profit guidance below Wall Street's expectations

By Mary Jane Credeur

(Bloomberg) — FedEx (FDX), the second-largest U.S. package-shipping company, forecast a profit for this quarter that lags behind analysts' estimates in a sign that the economy isn't recovering as quickly as investors hoped.

The shares fell in New York trading after FedEx said earnings for the three months ending in February will be 50 cents to 70 cents a share. Analysts expected 84 cents, based on the average of 17 estimates compiled by Bloomberg.

U.S. volumes haven't improved as much as international air shipments, which are among FedEx's most profitable offerings, as the recession weighs on purchasing decisions. Economists consider Memphis, Tennessee-based FedEx a bellwether because it moves goods ranging from industrial parts to apparel.

FedEx may be "grossly underestimating and playing it very conservative," said Helane Becker, an analyst at Jesup & Lamont Securities in New York, who recommends buying the stock. The forecast marked the third time this fiscal year that FedEx gave an outlook trailing analysts' estimates, and the company beat those projections the first two times, Becker said.

The forecast "reflects the current market outlook for fuel prices and a continued modest recovery in the global economy," FedEx said in a statement. Jet fuel for immediate delivery in New York Harbor has climbed 33 percent this year, while diesel fuel at U.S. pumps has risen 15 percent.

'Some Uncertainty'

Chief Financial Officer Alan Graf said in the statement that FedEx sees "some uncertainty regarding the sustainability of current demand trends after our peak shipping season." The current fiscal quarter spans the busy month of December and the traditionally slow months of January and February.

FedEx slid $3.25, or 3.6 percent, to $86.70 at 8:46 a.m. before regular New York Stock Exchange composite trading.

FedEx announced a profit last week of $1.10 a share for the quarter ended in November, topping a previous projection of as much as 95 cents.

Net income for the fiscal second quarter fell 30 percent to $345 million, compared with $493 million, or $1.58 a share, a year earlier, FedEx said today in releasing full results.

Revenue slid 9.9 percent to $8.6 billion, FedEx said.

International priority shipments rose 6 percent, while total express volumes in the U.S. increased 4 percent. Deliveries in the ground unit, which are less expensive for customers, rose 4 percent while freight shipments increased 3 percent.

To contact the reporter on this story: Mary Jane Credeur in Chicago at mcredeur@bloomberg.net.


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